CALGARY – Early financial results from the second quarter show continued pain in the oil patch, but companies say there are also glimmers of hope for a turnaround.
Encana Corp. swung to a US$89-million operating profit in the quarter compared with a US$167-million operating loss last year, saying cost cutting and efficiencies led to higher returns.
“We have made our business massively more efficient,” said Doug Suttles, the company’s chief executive officer, in a conference call.
He noted that compared with the second quarter of 2015, Encana’s operating costs are down 32 per cent, administrative costs are down 27 per cent, and well costs are down 30 per cent to 40 per cent compared with 2015 averages.
The Calgary-based oil and gas company (TSX:ECA) says that some of its key expenses will be US$100-million less than the previous estimate, and savings will be continued into 2017.
It’s also reinvesting savings and funds from the sales of key assets to increase its 2016 capital program by US$200 million.
Although the increased efficiencies didn’t prevent a net earnings loss of US$601 million for the quarter, the company says the loss is largely because of non-cash items such as hedging losses and impairments on reserves due to low commodity prices.
The second-quarter loss, reported in U.S. currency, amounted to 71 cents per share — an improvement from the same time last year when Encana lost $1.61 billion or US$1.91 per share.
For Precision Drilling Corp. the second quarter brought a near doubling of losses to $58 million, as revenue dropped 51 per cent from a year earlier owing to a pullback in spending by its North American customers.
The Calgary-based company (TSX:PD) says lower activity from its North American operations drove down revenue to $164 million, from $334.4 million in last year’s second quarter.
Its loss amounted to 20 cents per share, compared with 10 cents per share last year when the second-quarter loss was $30 million.
Precision Drilling says customer demand was weak during the second quarter as North American oil and gas companies slashed spending in reaction to low commodity prices experienced earlier this year.
But the company says with the recent rebound in prices, its activity levels have also started to improve — with its U.S. active rig count now sitting at 28, up 27 per cent from this year’s low.
The company also increased its backlog of rigs by one this year and added four rigs on average under contract for next year.
“Our customers appear to be looking beyond the oil price lows of earlier this year, resetting spending to current commodity price levels, and beginning the early stages of planning for improved longer-term fundamentals,” said Kevin Neveu, Precision’s chief executive officer, in a statement.
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